Outlook 2021: Spacetech, robotics, conversational AI will drive deep tech investments

As India’s startup ecosystem evolves, we see a greater emphasis on deep tech in India. In 2019 about 18% of startups had some associated deep tech component, up from 8% in 2014 (Source: Nasscom-Zinnov 2019 Startup Report). This increased emphasis has been synonymous with an increase in purely deep tech focussed startups. Over the past five years, we’ve seen some extremely ambitious deep tech startups be founded and funded in India with world class teams. Despite our growing appetite for deep tech, we are substantially behind our peers -- USA, China and Israel -- when it comes to the number of deep tech startups relative to the ecosystem’s size.

2020 got off to a roaring start with around $300 million committed to early stage deep tech startups in India. What followed was a recalibration of the deep tech ecosystem in the country due to COVID-19. The pandemic’s initial months led to a substantial decrease in the number of deep tech investments and total funding compared to 2019. 

Now, as we put 2020 into our rearview mirror, there seems to be a renewed deal flow and growing investor confidence for the upcoming year. 

An essential factor to note about deep tech investments is that they have extended gestation periods, focusing on problem statements that will persist despite, and beyond, COVID-19. In fact, with the digitisation brought on by the pandemic, there seem to be a lot more tailwinds than headwinds for deep tech startups. Despite the bullishness on deep tech in general, there are a few sectors investors in India are incredibly excited about.

• Spacetech: 2020 was a watershed moment for spacetech in India. We saw the first successful test fired by a rocket engine from a private Indian company. 2021 will most likely see an attempt to launch an entire rocket into orbit by an Indian startup. What’s more, these launches will be closely followed by the launch of private Indian satellite constellations. With the demand for rockets and satellites increasing and the regulatory framework for private players in the Indian space market becoming more transparent, we can expect to see this sector ‘take off’ in the near future.
• Robotics: One of the most remarkable effects of the pandemic has been consumer willingness to adopt new technologies. The labour shortages have prompted consumers adopting products like robotic vacuums in their homes. This trend is set to continue in the commercial space. We’re likely to see an increased demand in warehousing and manufacturing robots. Currently, Indian startups creating these robots look to the west as their primary markets. 2021, when consumption and manufacturing resume, might be the first wave of intelligent robotics in India. 
• Conversational AI: Speaking about AI/ML is pretty cliche. We’ve been hearing about the AI revolution since the dawn of the previous decade. Conversational AI has definitely not become as ubiquitous as was promised by Google in 2018, but we’ve made steady progress. Technologies like OpenAI’s GPT-3 will enable faster and more accurate product development. There’s a lot of potential for Indian startups to build industry-specific and custom solutions for different markets.
• Biotechnology: From creating plant-based meats to bio-manufacturing organic compounds, the number of applications in this sector is endless. Unfortunately, India has been a perennial laggard in this space despite having robust pharmaceutical and bio-chemical industries. India has the technical experts in the biology field, but the ancillary technologies that are essential in biotech startups have recently become affordable and mass-produced. Advances in gene mapping, gene editing and bio-printing technologies have made identifying, modifying and manufacturing biological materials a lot faster and affordable. We can expect some exciting startups coming out of India in this space. 

Two major ingredients make a vibrant deep tech ecosystem -- talent and funding. Despite the brain drain, India has plenty of deep tech talent. What we’re working on is the funding aspect. No doubt our ecosystem is evolving; a small but growing number of investors are willing to make these outlandish bets. It’s not going to be long before deep tech goes mainstream in India!

Vishesh Rajaram

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Vishesh Rajaram is founder and managing partner of Speciale Invest. The views in this article are his own.